Rivian Automotive (RIVN 11.15%) went public at the perfect time. Optimism was high as the worst of the COVID-19 pandemic seemed over. The venture capital and initial public offering (IPO) markets were flush with cash. And on Nov. 10, 2021, Rivian had its IPO, shooting up to a staggering intraday high of $179.47 per share on Nov. 16, 2020. Shortly after, the S&P 500 hit an all-time high in early January 2022.

Rivian's spike proved to be short-lived. At the time of this writing, the stock is down around 90% from that all-time high. If you based Rivian's success on its stock chart alone, it looks like a major disappointment. But Rivian is a perfect example of why separating a company from its stock price is important.

Rivian's success as a company is masked by its meme-stock past. Here's why the company is doing well and why this growth stock is worth buying in December.

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Delivering on promises

Rivian (the stock) may have gone public at the perfect time, but 2022 proved to be extremely challenging for Rivian as a company. Supply chain bottlenecks and inflationary pressures stunted the company's growth and drove up costs. Rivian found itself burning through cash at a breakneck pace -- the last thing investors want to hear from an unprofitable company. Rivian finished the year with production of 24,337 vehicles and $11.6 billion in cash and cash equivalents.

In its fourth-quarter 2022 shareholder letter, Rivian named its goals in 2023: produce 50,000 vehicles; post an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $4.3 billion; and spend $2 billion on capital expenditures (capex) compared to just $1.4 billion in 2021. The uptick in forecasted capex was mainly due to production increases and factory expansions.

In its Q3 2023 shareholder letter, Rivian updated its full-year production guidance to 54,000 vehicles, an adjusted EBITDA loss of $4 billion, and just $1.1 billion in capex -- showing the company's ability to cut costs in the face of high interest rates and a difficult sales environment. Rivian is on track to make more vehicles, lose less money, and spend less money on growth than it forecasted going into the year. It is paramount for a young public company to set reasonable expectations and meet or exceed them. And Rivian is doing that in 2023.

Even better, Rivian said that it expects to reach positive gross profit in 2024 thanks to higher production, which lowers fixed costs per vehicle, reduces its material cost, and raises the average selling price of its vehicles.

A reasonable valuation

Rivian should be able to increase production by around 50% per year for at least the next few years thanks to factory expansions. But investors will better understand Rivian's 2024 expectations when it reports Q4 and full-year 2023 earnings in late February. For now, Rivian's 4.3 price-to-sales (P/S) ratio looks fairly inexpensive for a company that could be growing sales by over 50% and posting positive gross margins next year. In fact, Rivian's P/S ratio is half that of Tesla's 8.7 ratio.

While Rivian certainly deserves to trade at a lower multiple than Tesla given that it isn't profitable and is a less proven company, half the P/S ratio seems like too much of a discount, considering Rivian will probably grow its sales faster than Tesla.

It's also worth mentioning that Rivian finished the quarter with $7.9 billion in cash and $2.7 billion in long-term debt. It's a far lower cash position than what Rivian had in past years. But it is still sizable for a company that sports a mere $17 billion market cap.

Rivian stock is worth buying now

Rivian has clear and defined expectations for 2024. If it delivers, the stock deserves to rise. If it doesn't, the stock probably deserves to fall -- at least in the short term.

What's nice about a stock like Rivian is its clearly defined targets. Sometimes in investing, it's hard to know exactly what Wall Street is expecting. But for Rivian, the key performance metrics are obvious, making for a straightforward setup in 2024. The market seems to have adjusted to valuing Rivian as it should be valued, not as a meme stock.

Ultimately, investors want a stock to rise based on merit, not hype. If Rivian grows sales growth and the stock price doesn't rise, it will further compress its P/S ratio and make Rivian a better value. Reducing cash burn will make the company's eventual profitability more realistic.

There's something to be said about the psychology of investing and how it affects a stock like Rivian. Long-term investors confident in Rivian's three-to-five-year plan can sit back and monitor its key metrics. Those sitting on the sidelines waiting for more proof have a short list of what to look for.

All told, Rivian deserves a lot of credit for delivering incredibly impressive results in 2023 for what has been a challenging year for automakers. Its products have proven to hold their own against electric vehicle (EV) competition and legacy automakers. Rivian has what it takes to grow into a formidable EV maker.

Investors with a high risk tolerance would do well to consider the stock now. And those with a lower tolerance may benefit from giving Rivian another few quarters or maybe even an entire year to prove it can build upon its results and not give ground.